Max’s Floral Shoppes is a three store retailer of fresh “Haw…
Max’s Floral Shoppes is a three store retailer of fresh “Hawaiian” inspired floral arrangements serving the greater Santa Monica area. Max’s has a central refrigerated warehouse where he stores exotic flowers shipped directly to him (by air) from his supplier in Maui Hawaii. The lead-time from order to receipt is 2 weeks. Max’s order costs are $150 per order and his holding cost are 10% of the cost of a stem. Note that a “stem” is a single flower in an arrangement. Stems are ordered as individual units, but the order quantity needs to be a multiple of 6 — each arrangement created by Max has 6 stems and the average cost per stem is $4. The grouping only occurs when the arrangements are created. Max then sells each arrangement for $65. Max’s annual demand follows a normal distribution with a mean of 11,025 arrangements and a standard deviation of 550 arrangements. To maintain customer goodwill Max’s has set a high service level objective of 98% in stock. Consider a year to have 52 weeks or 365 days. What should be Max’s ROP (Reorder Point). Round up the ROP to the nearest multiple of 6. Note your answer may differ slightly depending upon rounding. Pick the answer closest to your answer. Use the Z-table from a Prior Problem This Problem Counts 5 Points
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